tv Power Lunch CNBC October 21, 2009 12:00pm-12:25pm EDT
welcome to "power lunch." i'm bill griffeth. sue is off. ibm leading. the vol a tiks index, that fear indicator that we often talk about is close to crossing below 20 for the first time since august of last year. something we'll look at. and the dollar is also cracking a big psychological level against the euro, around 1.50. company's chief financial officer is going to join us first on cnbc with his outlook on the bank and also the financial industry. >> and i'll dennis kneale, profiting from pooches, poodles, puppies. we'll see home making goddess martha stewart and her pet industry and here's what else is on the menu. >> i'm jane wells from los
angeles. we're going to hear from the 8 million pound gorilla. how low will prices go? inquiring minds want to know. we hope to find out later today. >> i'm scott cohn. if you want to understand the real world effects of a weak u.s. dollar, make a run for the border. that's where we are. that's detroit, michigan, behind me. this is windsor, ontario. we're serving of cents on the dollar. >> while business might be improving, the online auction house still faces a pitched battle. where momentum is alive and well. what's up with skype. it's involved in litigation and it's a huge strain on the ebay cycle. >> stocks are higher on earnings news thus far. financials and technology leading the way. we also have a really important
s.e.c. vote on regulating the so-called dark pools that are really important to some of the big banks out there including goldman sachs. bob pisani kicks it off. bob. >> interesting day. the big story is some of the financials. wells fargo is the most important stock of the day. they had big loan losses. the company is consisting the consumer loan losses will peak in the first half of 2010 and total credit losses should peak at 2010 overall. with oar trying to get a handle on when they're going to peak. that's a very important conti e commentary from them. morgan stanley. u.s. pan corp also did very well. a little bit of sell on the news or don't add to your position is certainly to be expected houchlt about the energy stocks? we saw it sitting at 8 $80. there's your names here sitting at new highs here. even eog, of course skplor, skp
and production companies. when that happens you tend to see a move up in the material stocks. you have freeport which had earnings out. all the metal stocks to the upside. way tonight bring you up to date on that dark pool regulation or commentary from the s.e.c. here because a couple of important things have been coming out. they voted 5-0 to propose new regulations for dark pools. number one they want to make information on buying or selling interest available to the general public. now, these dark pools are sort of private trading venues designing to match large blocks of stock. the concern here is they may operate a little bit like a private club and some may be getting betting pricing. number, two, they're proposing. right now there's a limit of 5% of the trading volume. they're proposing to lower that to 0.25%. finally they're proposing that dark pools be requiring to disclose their identity when
they print a trade or execute a trade, of course. that is all in the game of providing more transparency. 90-day commentary rushlg michelle, and then they will make a ruling. >> it was during the summer when they announced they were actually going to look at dark pools. came in the same sentence. they said we're going to look at dark pools and we're going to look at flash trading and i guess that makes sense because conceptually they're both kind of the same thing youch have a stream of orders that only the subset of the market is getting to see before anybody else, right? in the end they're doing the same thing. >> flash trading is way of trading. >> it's a way of seeing a pool? >> no. flash trading is a method dollgy for pools. >> if you're a certain subset of the market you get to see a string of trades that are up for offer before the rest of the market does. it's like a dark pool. same idea. >> they're different concepts
though. the important thing is this. it's a very delicate balance that the s.e.c. has to strike here. they have to make sure that these dark pools pass the sniff test of fairness, that is they're not creating a t two-tiered trading. they can't drive up -- drive people away and dry up the liquidity because they do create a lot of liquidity for trading. you don't want people go away. you don't want to drive people offshore as well. so it's a very delicate balance to strike for the s.e.c. >> all right. you want all the market players in the same place or don't you i think is the bottom line. thanks, bob. let's get back to our reporter, scott wapner. >> as we mentioned at the top of the show, technology was one of the standouts. we're um half a percent. yahoo! is the story. better-than-expected earnings. first it was apple and now yahoo!. better than expected. the stock is up 3 1/2 percent.
their display ad revenue was much better than expected as well. if you've been looking for the stock to do something, it hasn't done anything over the last three months or so. it's up about 4%. apple's up. rimm is lower but ebay reports, today its stock is up. san disk blew away the numbers. san disk is higher by 10 1/2 percent. let's go down to sharon epperson at the nymex. >> we're looking at prices that have hit the day so far. we'll see how high we can go. the next key resistance level will be $82 a barrel. what took oil prices to the level, we got the euro crossing. that held after we got the
inventory report from the department of energy showing a decline in gasoline and in fuel supplies. refineries are cutting rates and as they're cutting rates we're looking at a decline and that's helping push up oil prices. back to you. >> morgan stanley among the financial titans out there. brokerage giant ending its losing streak and reporting a prosk. cnbc's mary thompson is listening in on the morgan conference call. what are you hearing. >> they're just wrapping up. the bank showed continuing operating improvement in the last quarter. it helped it to beats the frachlt keller hurst says there are positive signs in mergers and acquisitions. the cost of funding has declined
as financials continue to raise debt and equity, however it remains higher than in precrisis level. >> the joint venture with smith barney is on track and it's halfway through the hiring it needs to do. new hires in institutional securities boosted revenue and fixed income and trading during the quarter. remember after the credit crisis, morgan stanley had dialed back. it's a trend that morgan is starting to reverse. he said they're starting to recapture market shares where they abandoned in droves last fall. he says they're up 14% and profitability is coming back. it's down from last year's results. this year's profits topping estimates by 11 cents a share. bill, back to you. >> thank you very much. a lot of news for investors to digest right now. earnings, the dollar moving lower, especially against the
euro. oil has been moving higher. the vix getting close to that 20 level. it's right at that level now. close below that would be the first time we've seen that since august of 2008. what do you do now? let's go with j.j. burns and lincoln who's manager of the lind group in chicago. let me start with you. i have to say, mine you've been skeptical of this stock market but you've missed a few points on the dow. we're above 10,000, j.j. >> you haven't missed much of anything yochl you see continued spreads. your average high yield bond is a better than the stock market at this point. >> so you feel you've taken less risks. >> absolutely. furthermore we're not out of stocks. we're in stocks selectively. those are telecommunications
specifically, companies like apple, companies that are in the broad electronics base, which has a broad dispersings of products you would want. . >> how about you? do you prefer to stay there or have you looked at corporate bonds like j.j.? >> we looked at it. that trade got crowded and we're out of that. the equity market has had sort of a life of its own, particularly since july. >> is it justified? >> yeah. well a lot of it has to do with this dollar issue that we're seeing again reflected today. you know, dollar related -- there's three stools to that trade, right? american exporters. all of them very dollar-related. dollar sensitive. . e with saw caterpillar get tailwinds. we saw coca-cola benefit from repate yating dollars.
now we're seeing the commodities benefit from the dollar decline further. remember the old economist index, the big mac index. where was the cheapest place to buy a big mac. today at the beginning of the year -- >> what's your point, lincoln. >> i'm sorry. you're taking too long. j.j., an extraordinary fact appears in the wall street journal today. the median 401(k), the median 401(k) is up 7% from two years ago when stocks were at a high. i can't even believe that, and you couldn't have done that without being in stocks. right, j.j.? >> why? you certainly could have done it. >> the s&p is up 50% since march. >> dennis, i'm telling you it's not about just being in broad large cap stocks. it's about being more selective
and this is a consumer driven economy. how can you say that the seeds of recovery are in place when the average worker is getting furloughed right now? >> in previous decades we actually had higher gdp growth than when they were financing the growth with a whole bunch of debt. >> how much -- >> steroidal and medication. i can't risk it. when that stimulus gets taken away, want to make sure the assets are going to be growing. >> lincoln, how are you that the vix is below 20. contrarians would say that's a very bad sign. >> i think it's a very bad sign. a sign of complacency. remember the other asset that j.j.'s clients own is their house and 20% of those houses are still under water. we've got a lot of way to go to recap tallize the american
consumers' balance sheet and the big debt is going to be there for a long time. . >> just to add to that, you've got the homes that are still in envenn torrey. >> we're going to talk with the wells fargo ceo. >> i want to know where you get a cheap big mac these days. straight ahead, boeing, wells fargo -- >> michelle and matt nesto have it coming up in a few minutes. >> also this hour, winning and power. jp morgan's go-to person on china. tells us the best way to play choo china's red-hot economy. >> get ready for the "fast money" halftime report. you're watching "power lunch." we're first on cnbc and cnbc is first in business world wooild. national car rental? that's my choice.
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surprise factor, the degree at which the earnings have come in better than expected is now 21%. it was 19% yesterday. >> do i understand that, they've beaten estimates by 21%. >> on average. the average is 21% on eps. i don't have the revenue yet. if you take a look at some of the big sectors and what's moved just from day to day, the financials, again, they went into the quarter an a plus 59 reading. >> with huge expectations that they were going to have a massive rebound. >> supposed to be positive. to 59 was up to 100 yesterday. it's up to -- >> wait, wait, wait. so the expectations were that financials very going to see an approval of earnings but thus far it's been an improvement of 118%? >> yes. >> wow. >> if you take a look at materials they went into the bottom of the pack. they were supposed to be down at 68. that's firmed up to minus 56 here. >> that's an improvement.
>> also the actual earnings so far -- this is not a blended number -- are down 15.7. that's actually worse than the 12.7% figure yesterday. big companies can skew that. >> that's where all the companies reported down 15% are the earnings, but we went into this with expectation that overall the s&p would see a decline in earnings by about 25%. so better than the expectations for the actual numbers we've seen so far. >> if you blend it out, went to 25. the latest read is about a minus 20%. minus 23%. so if you take all of that, what we know and what we feel in our gut and you ask a guy like bob dow, what do you think about the earnings season? here's what he has to say. >> relative expectations, b mierngs b plus.
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a media company hitting a new high. who would have thought of that. and cb richard ellis and holmes, nabors industries. i don't know where they're at. dte energy. . >> we're seeing that a lot today, as a matter of fact. well, all week here "power lunch" has been taking a look at women and power, and today we have a leader whose views influence the allocation of trillions of dollars in assets. we're joined once again by jing. she was just named one of
fortune's 50 most powerful global businesswomen in business. welcome back. >> thank you very much. >> the view of china, we're recovering in the u.s. we've watched kai na as they've recovered. how do you view them. our dollar is suffering. >> you know, the chinese economy has staged a very strong rebound since the first quarter of 2009. as a matter of fact, the pace of recovery has surpassed even the most optimistic forecasts. the chinese yen has been pegged to it. but the underlying economy very strong and we expect that momentum to continue. maybe in the next few months the. >> rob: the r & b is going to appreciate again. >> give us more on what the
chinese are thinking when it comes to the dollar. that they're going to stop buying treasuries and we desperately need them to do so. >> well, the desire to diversify is absolutely there. but the pace will be very slow because the execution is becoming very difficult as china's treasury holdings continue to increase. in the last month, chinese holdings now have amounted to about 800 billion u.s. dollars. china also holds about 500 billion u.s. dollars in agency bonds. so in total, 1.3 trillion dollars of u.s. dollar debt. so how do you diversify? >> there are very few choices. >> i love your name, by the winston-salem. i have a daughter named jing jing. doesn't that mean because they hold so much of the u.s. stuff china is totally bluffing and they cannot afford to deliver a blow that they would deliver by abandoning it? >> china has a long-term
strategy. they want to diversify away from the paper dollar. i think in the media term we can see china purchasing more gold and commodities including coal, iron ore and copper. i could see them buying more commodities and currencies in while. in terms of diversification, it's a long-term strategy, not a short-term strategy. >> what's the best way to make money oton chi